One of the biggest surprises to date about Joe Biden’s presidency is that he’s just as hawkish towards China as his predecessor.
Anyone who expected the United States to respond to trade hostilities with China initiated by Donald Trump and its war against specific companies like Huawei will now have been disillusioned with this theory.
Although Mr. Biden seeks diplomatic dialogue with China, President recent visit to Europe for the G7 and NATO summits has been widely interpreted as an attempt to build support for a tougher stance on the country from US allies.
Meanwhile, it was reported today that the United States and Japan are participating in joint war games and military exercises in preparation for a possible conflict with China over Taiwan.
There is, however, a corner of the United States that remains more favorable to China: Wall Street.
It has just given the best possible reception to Didi Global, the Chinese carpooling application, competing with Uber.
The company was listed on the New York Stock Exchange on Wednesday and, after valuing its shares at $ 14 each, saw them rise 21% at one point.
They eventually settled at $ 14.14, giving the company a market valuation of almost $ 70 billion.
What is striking is that the shares were listed in the high end of the valuation range published by the company and that Didi raised $ 4 billion in the initial public offering (IPO), more than initially expected.
It was the largest IPO of a Chinese company on Wall Street since the E-commerce giant Alibaba raised $ 25 billion in 2014.
Another very striking aspect of the IPO is that, according to the Wall Street Journal, Didi rated the show just three business days after launching its roadshow, making it one of the shortest speeches ever made. investors for a recent stock market debut.
If investors were the least bit worried about the possible political risks of investing money in a leading Chinese company, which derives no less than 94% of its revenue from China, they certainly haven’t. shown.
This is despite the fact that the US Congress passed a law last year that could force Chinese companies to give up their listing in the United States.
The law, which was drafted by Democratic and Republican senators, was passed by the US Senate in May last year and was unanimously approved by the House of Representatives in December.
The measure was introduced following a number of accounting scandals involving Chinese companies, including the coffee chain Luckin Coffee, which was delisted from the Nasdaq in April last year.
It was adopted in response to China’s refusal to allow US regulators to inspect audit files produced in the country.
The Securities and Exchange Commission (SEC), the main US financial regulator, said when introducing the bill to the Senate that it would mean investing in Chinese companies would carry “significantly higher risk.”
Didi, which was only founded in 2012, has actually warned investors of these risks as it approaches its IPO.
Page 11 of the share sales prospectus included this disclaimer: âRecent litigation and negative publicity regarding China-based companies listed in the United States may have a negative impact on our stock price. [shares]. “
Didi is also not the only Chinese company to have been listed in the United States in recent weeks.
According to Refinitiv, the data provider, 29 Chinese companies raised a total of $ 7.6 billion in the first six months of the year.
This compares to the $ 11.7 billion raised by Chinese companies through IPOs in the United States throughout 2020 – which itself was the busiest year since 2014.
Other Chinese companies entering the New York market so far this year include Full Truck Alliance, a freight forwarding platform now valued at $ 22.1 billion, which has raised 1.6 billion dollars. billion dollars when it hit the market last month.
On the same day, AiHuiShu, a consumer electronics trading and services platform, was listed on the New York Stock Exchange.
Other Chinese companies listed in the United States in 2021 include MissFresh, an online grocery delivery company, which joined the Nasdaq last month with a valuation of $ 2.5 billion.
And Kanzhun, an online recruiting services company, was also launched last month.
Further, Tuya, an “Internet of Things” cloud platform, joined the stock market in March and now carries a valuation of $ 25 billion.
Not all of these companies have performed as well in the secondary market as Didi.
MissFresh, for example, saw its shares drop 25% when it first started out.
Others, like AiHuiShu, are still trading above their price when they started out.
In some cases, the premium is spectacular: Kanzhun shares closed last night at $ 39.65, having sold for $ 19 each.
This rush to enroll in the second half of 2020 and early 2021 reflects, in part, a bottleneck of new issues that have built up in the early months of the pandemic.
This reflects a growing belief that the Biden administration will eventually relax legislation passed last year against Chinese companies.
The trend also reflects a buzzing IPO market – US companies have raised $ 70 billion so far this year – propelled by ultra-cheap money due to the of the Federal Reserve relaxed monetary policy and by Mr. Biden’s stimulus measures.
And it also reflects the fact that many of these Chinese companies entering the market are precisely in the sectors – technology, media and telecommunications – to which investors want to gain more exposure.
It also shows, however, how quickly some American investors reacted after the Luckin coffee scandal.
With more and more Chinese companies gearing up to enter the market, they will have few excuses if holding these shares later leaves their fingers burnt.